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Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 21)

1
What are examples of direct labor costs?
Answer
(A)
Assembly line workers' wages
2
Which of the following is an example of an expense?
Answer
(C)
Rent Expense
3
Which financial statement is used to evaluate a company's financial position at a point in time?
Answer
(C)
Balance Sheet
4
What could be considered an advantage of forming a partnership?
Answer
A
B
5
What is the accounting equation?
Answer
(C)
Assets = Liabilities + Equity
6
In the statement of financial position, what does the Accumulated fund represent?
Answer
(C)
Net worth.
7
In a manufacturing business, which of the following represents factory overhead costs?
Answer
(C)
Indirect materials
8
What is the impact on the financial statements when adjusting for depreciation?
Answer
(B)
Increases accumulated depreciation, decreases net profit and decreases the value of non-current assets.
9
What is the purpose of adjusting for 'accruals' in an Income and Expenditure account?
Answer
(A)
To ensure that the income and expenditure are correctly reflected for the period they relate to.
10
What is the impact on the financial statements if a business prepays rent?
Answer
(A)
Increase assets and decrease equity.
11
What impact does a partner's share of a loss have on the partner's capital account?
Answer
(B)
Decreases it.
12
Which of the following statements is true regarding the use of the total trade receivables account?
Answer
(C)
It helps to calculate the total credit sales for the period.
13
Which of the following best describes the term 'indirect labor'?
Answer
(B)
Labor costs of the factory's maintenance staff
14
How does interest on capital affect a partner's capital account?
Answer
(B)
It increases it.
15
What will happen to net income if the ending inventory is understated?
Answer
(B)
It will decrease.
16
In the context of a partnership, what is meant by 'drawings'?
Answer
(B)
Money or assets withdrawn by a partner for personal use.
17
Which of the following is the formula to calculate the cost of goods manufactured?
Answer
(B)
Beginning WIP + Direct Materials + Direct Labor + Factory Overhead - Ending WIP
18
What is the purpose of making a provision for doubtful debts?
Answer
(C)
To estimate and recognize the potential for uncollectible accounts receivable.
19
Which of the following is a key difference between a club's financial statements and those of a commercial business?
Answer
C
D
20
In relation to dividend payments, what is the meaning of "cum-dividend"?
Answer
(B)
The shares are sold with the right to receive the upcoming dividend.
21
What are examples of current assets?
Answer
A
B
C
22
What is the impact on the partners' capital accounts when the partnership earns a net profit?
Answer
(C)
The capital accounts are increased.
23
What is the difference between direct and indirect costs?
Answer
(A)
Direct costs can be easily and economically traced to a cost object while indirect costs cannot.
24
Which of the following is the correct order of a manufacturing company's financial statements?
Answer
(C)
Income Statement, Statement of Retained Earnings, Balance Sheet, Statement of Cash Flows
25
What does the income statement of a partnership start with?
Answer
(A)
Revenue
26
Which financial statement would show the initial investment in a partnership?
Answer
(C)
Balance Sheet
27
When a partner contributes assets other than cash to the partnership, at what value are those assets recorded in the partnership's books?
Answer
(B)
The fair market value of the assets at the time of contribution.
28
What happens to the company's net profit when writing off uncollectible debts?
Answer
(B)
The profit decreases.
29
Which of the following does *not* form part of income and expenditure account for a club or society?
Answer
(C)
Equipment at its net book value.
30
What is the effect of accrued income on the financial statements?
Answer
A
B
31
What is an advantage of partnership?
Answer
(A)
More owners
32
Which of the following is a key advantage of being a sole trader?
Answer
(A)
Easy to set up.
33
What type of liability do general partners have in a partnership?
Answer
(B)
Unlimited liability.
34
Which of the following costs would be classified as a selling expense?
Answer
(C)
Advertising expense
35
Which of the following is an advantage of a limited company over a sole trader?
Answer
(C)
Greater access to capital.
36
What is the role of the income statement?
Answer
(C)
To show a company's revenues and expenses.
37
What is the formula to determine the profit for the year?
Answer
(A)
Revenue - Expenses
38
Which of the following is the typical effect of an adjusting entry on the financial statements?
Answer
(B)
It will update the revenue and expense accounts.
39
How can a partnership expand?
Answer
A
B
C
40
What impact does the adjustment for accrued expenses have on the financial statements?
Answer
(C)
Increases liabilities and increases expenses.
41
What does the manufacturing account show?
Answer
(C)
The cost of production
42
When a partner invests services into the partnership, at what value is the investment recorded?
Answer
(B)
The estimated fair value of the services provided.
43
What impact does a share buyback have on a company's capital structure?
Answer
(C)
It decreases the company's shareholder equity.
44
What would increase the partners' capital accounts?
Answer
(A)
The allocation of profit.
45
What is the main activity of a manufacturing business?
Answer
(C)
Producing goods from raw materials
46
In a manufacturing company, which type of cost is easiest to trace directly to a product?
Answer
(B)
Direct materials
47
Which of the following is considered a direct cost in a manufacturing business?
Answer
(C)
Direct materials
48
What is the term for the costs which can be easily and economically traced to a product?
Answer
(C)
Direct costs
49
Which of the following would be classified as a current asset?
Answer
(C)
Inventory
50
What is the function of the Statement of Changes in Equity?
Answer
(B)
To detail the changes in a company's equity over a period.